id the dry cleaner lose your coat? Does your neighbor's newly graded driveway cause water to run into your basement? If you can't settle those types of disputes with the other party, your next best option may be small claims court.

On any day in any major city across the U.S., from 100 to 200 cases may be on the small claims court docket. These courts offer access to justice for anyone who follows the rules of procedure. Lawyers handle only a few small claims cases. In fact, some jurisdictions prohibit the use of a lawyer's services except for corporations.

What are small claims courts? These are municipal courts where you can sue an individual or business and tell your side of the story, quickly and efficiently. They're designed to settle disputes where relatively small amounts of money are involved. Ceiling limits vary from state to state. For instance, in California you may sue for recovery of money up to $5,000; in Kansas, the amount is $1,800. In addition, you can sue for the maximum amount only a specified number of times during a calendar year. In Kansas, for example, that number is 10 times a year.

   You have only
   one opportunity
   to present your case
   before the judge rules,
   so arrive at court
   as prepared as possible.

Unpaid judgments
may stay on
your credit report
for as long as seven years,
and can hurt your ability
to get a job,
borrow money,
or buy a house.
What if you're the plaintiff
If you are the plaintiff—the one bringing the action to court and filing a petition with the court—make sure you first exhaust all other remedies for recovering the money. That includes the obvious but sometimes overlooked demand for payment. Before initiating court action, court procedures usually require that you ask the other party for the money. In other words, you are �making a demand.� In most states it can be by verbal or written request, but as a rule it's best to do it in writing.

Send a copy of your demand for payment by certified mail. State that it is the final letter for payment and that you must receive the amount of money owed before a specific date. State that you will begin court action if you don't receive the money before the due date. Keep copies of all correspondence with the other party.

If you talked to the defendant and he is unable to pay, it may be in your mutual best interest to work out a payment plan instead of going to court.

If you proceed with legal action, check with your local county clerk's office for instructions about how to bring a suit. Procedures vary from state to state. It's also wise to anticipate expenses involved. Filing fees—which the plaintiff pays—usually are nominal, ranging on average between $20 and $40 per summons. Also consider travel expenses and time away from work. You'll be less inconvenienced in some locations where small claims courts hold evening and Saturday hearings. However, courts set trial dates at their discretion.

Most important, make sure you do your homework before filing your lawsuit. To start, you'll need to know the exact name and address of the defendant—that's the person, business, or corporation you're naming in the court filings and against whom you're bringing legal action. Then make sure you bring the suit in the same venue—locale—where the defendant lives. If the suit is based on a contract, bring the suit where the contract was to be performed.

You must file your claim within specified time frames. Check with your state law reference library regarding the statute of limitations. For instance, you typically must file a personal injury claim within a year after the accident. A claim for money, without a written contract, often has a two-year statute of limitations.

Once you've filled out the summons and complaint outlining your case's main points, carefully follow the rules regarding notifying—serving—the other party. You can ask the small claims court to notify the defendant by certified mail. Or you can use a process server, local sheriff, or marshal to serve the defendant. Regardless what form you use, make sure you receive a Proof of Service form proving that the defendant was served.

You have only one opportunity to present your case before the judge rules, so arrive at court as prepared as possible. Bring photos, receipts, bills, or any evidence that helps your case. Ask witnesses to come with you or subpoena them in advance, usually seven days before trial.

Realize that once you file your claim the defendant may file a counterclaim. At the hearing, the judge may use your testimony and evidence to support the counterclaim as well as your original claim—another reason to make sure you've done your homework.

What if you're the defendant
If you're named as a defendant, never ignore the complaint. File your response or make a counterclaim within the allowable time frame—usually within 30 days of receiving the summons. Next, never ignore the court date. If you don't appear, you may lose by default. The court may enter a judgment against you and you may have to pay the plaintiff's court costs, as well.

If you do owe the claim, you might be able to contact the plaintiff and settle the dispute out of court. If the plaintiff agrees to a payment plan, make sure he or she files a Request for Dismissal with the court once you make your final payment. If you've paid the amount agreed to and the plaintiff has filed the dismissal form, the court won't enter a judgment against you.

What if you believe the plaintiff owes you money? File a counterclaim in the same court. Again, depending on the state, you or the court must notify the plaintiff of your filing before your scheduled court date. Time to file a response also varies from state to state. As a matter of convenience, it's usually beneficial to both you and the plaintiff if the court can hear both claims at the same time.

When it's time for court, arrive prepared. You should be able to tell your side of the story clearly and succinctly, in a matter of minutes. The judge will hear both sides, consider evidence and statements, then usually make an immediate ruling.

If you do not agree with the judge's decision, don't become argumentative. As a defendant, you have a right to appeal the decision (in most states the plaintiff also has the right to appeal a decision in small claims court). If you appeal, your case will go to a higher court and, at that time, it's advisable to have an attorney represent you.

Before initiating
court action,
you must ask
the other party
for the money.

Collecting a small claims judgment
What can you expect if you win your case? If you're the plaintiff and win your suit, the court will enter a judgment against the defendant. If the defendant doesn't appeal the decision within a designated time—usually 30 days after the court enters the judgment—the defendant has a legal obligation to pay the judgment. Judgments generally are collectible for 10 years.

As the judgment creditor—the one suing for collection of a debt—you can ask the court to help enforce payment of the debt if the defendant doesn't pay within a specified time. For instance, you may need to get a garnishment—where wages are seized to satisfy the debt—or a bank account levy, or a lien on the debtor's property through the court. You also might need to hire an attorney or use a collection agency to help collect the debt.

If you are the judgment debtor, pay the debt as soon as possible. If you own real property, a judgment can tie up the property and possibly force you to sell it. Your credit also is adversely affected as long as there is an unpaid judgment against you. Unpaid judgments may stay on your credit report for as long as seven years, and may hurt your ability to get a job, borrow money, or buy a house.

In addition to collecting money owed per claim, the court also may rule the winning side can recover filing fees, fees for witnesses, and fees for subpoenas. You also might recover costs for travel and other miscellaneous expenses under the heading of damages.

©1999 Credit Union National Association Inc.